On 17 July 2013 the Minister of Finance, Mr Pravin Gordhan, announced the members of the Tax Review Committee (the Committee) as well as the Committee’s Terms of Reference.
This gave effect to the Minister’s previous announcement in February 2013 when he tabled the 2013/14 Budget that government will initiate a tax review this year “to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability”.
It was decided at the inaugural meeting of the Committee on 25 July 2013 that the Committee will be known as The Davis Tax Committee (DTC).
Background to the review of the tax system
The South African tax system has changed significantly since the recommendations of the last tax commission (The Katz Commission). The changes to the system, arising from the recommendations, include the establishment of an independent tax and customs administration (the South African Revenue Service), the broadening of the tax base, and the lowering of marginal tax rates. These, and other changes have contributed to the development of a relatively robust and competitive tax system. Today South Africa’s tax policy and tax administration compares favourably with those of many developed and emerging economies.
However, given the pace of globalisation, the relatively modest economic growth after the 2008/09 economic recession, and the significant social challenges such as persistent unemployment, poverty and inequality, there is a need to review what role the tax system can play as part of a coherent and effective fiscal policy framework in addressing these challenges. In line with local and international priorities at the moment, there is an immediate need to address concerns about the growth of small businesses as well as base erosion and profit shifting (BEPS), in the context of corporate income tax, as identified by the Organisation for Economic Co-operation and Development (OECD) and the Group of Twenty (G20).
The Committee will operate on the basis of various sub-committees dealing with specific items in the Terms of Reference (TOR). Each sub-committee will stipulate a date by which submissions must be received from all stakeholders. Based on wide consultation and submissions received, each sub-committee will prepare an interim report for the approval of the Committee as a whole and subsequent submission to the Minister of Finance. The Minister of Finance will determine any further steps to be taken with regard to each interim report.